India’s strict digital lending rules have disrupted the card services of foreign-backed fintech firms and jeopardized Amazon’s loan offerings, according to industry sources and a document seen by Reuters, prompting companies to chart lobbying pushback. has been inspired to do.
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Citing concerns over high rates and unfair practices, the Reserve Bank of India (RBI) this month said a loan borrower should deal directly with the bank, jolting prepaid card providers and shopping websites that act as middlemen. Operate and process deferred loan payments promptly. ,
India’s digital lending market has grown rapidly and facilitated $2.2 billion in digital loans in 2021-22, with start-ups attracting foreign backers and giving traditional banks a run for their money in the credit business. are.
The new rules have already affected prepaid card offerings from Tiger Global-backed Slice and Accel-backed start-up Uni, which have partnered with banks and allowed users to split purchases into interest-free easy repayments However, this facility is not available with normal credit cards. ,
Solving the “time-sensitive money crunch” made Uni popular: its cards were swiped for an average of $67 million, far more than the credit cards some small private and public banks use in India.
The RBI has said the new rules were to be implemented immediately, but added that “detailed instructions will be issued separately.”
Nevertheless, Uni this week suspended its card services due to RBI regulations affecting hundreds of thousands of users, while Slice put a hold on the issuance of new cards.
Three industry sources said there are also growing concerns that the rules will affect big players Amazon.com Inc. And will affect Walmart’s plans to expand its popular buy-now-pay-later plans, which have tapped millions of users, three industry sources said.
This is because currently Amazon and Flipkart provide loan facility for their buyers. The bank makes the payment to the online merchant, while the borrower later makes the loan payment to the lender. Sources say that if online merchants cannot receive payments directly, the new RBI rules may affect this route.
The Internet and Mobile Association of India, an apex industry group representing Amazon and Flipkart, said in an internal lobbying document prepared in collaboration with consulting group PwC, “It is likely that the ease of availing credit by the customer will be seriously affected.” will be affected by it.”
The group plans to push the RBI to make direct merchant payments as an exception under the new rules.
Flipkart is bullish on the buy-now-pay-later business, saying in May it grew its user base for the service to over 60 lakh in seven months.
Sources said two other groups representing payments firms and digital lenders are also planning to lobby the RBI to reconsider certain provisions.
Slice said in a statement that it is committed to complying with Indian regulations, which it said is a recognition of the rapidly growing industry. It did not comment on business challenges.
RBI, IAMAI and PwC and none of the other companies responded to questions from Reuters.
protect consumers
In other new rules, the RBI has said that fin-tech firms should collect fees for facilitating digital loans from their banking partners and not from borrowers. And firms should also appoint nodal officers and do better checks on user data.
Rahul Sasi, a cyber security expert who was on the RBI panel that helped draft the new rules, told Reuters that while some disruption is inevitable due to the new rules, the ultimate aim is to protect consumers.
“The idea has always been to let businesses run, it was not about killing fintechs,” he said.
Still, fintech firms are concerned, and fear there will be more regulations on the way. Swapnil Bhaskar, Head of Strategy at Indian digital banking solutions provider “Neo”, said regulations could lead to industry consolidation and slow down the fast-growing industry.
The disruptions have disappointed some users.
Atul Bhadran, a 28-year-old engineer, said he happily used his Uni prepaid card to manage his budget by splitting his big purchases, such as the ₹19,000 ($238) he spent on the washing machine. Now, he can’t.
“If I wanted to spend a huge amount, I always had peace of mind,” he said.